State’s early stage firms raised record dollars in 2018, but total deals dipped slightly

The latest edition of “The Wisconsin Portfolio” shows more than $280 million was raised by the state’s early stage companies in 2018, a record for any one year in Wisconsin.

The report by the Wisconsin Technology Council and its Tech Council Investor Networks showed 121 early stage deals – down from 127 in 2017 – with average and mean deal sizes growing significantly.

Over the five-year period beginning in 2014, Wisconsin early stage companies have raised $1.216 billion. There were $218.8 million in early stage investments in 2014, $209.5 million in 2015, $276.2 million in 2016 and $231 million in 2017.

Using public reports, filings and surveys, the Wisconsin Technology Council and its Tech Council Investor Networks tracked a total of $280,713,497 that was invested in the 121 companies. The largest deals reported were SHINE Medical Technologies ($24.8 million), Propeller Health ($20 million), Engineered Propulsion Systems ($16.8 million), Titan Spine ($16.7 million), Midwestern BioAg and HealthMyne ($15 million each).

According to the Center for Venture Research in New Hampshire, the U.S. angel investor market in 2018 showed an increase in market participation in more companies, albeit at smaller investment amounts. In Wisconsin, it was the opposite: fewer companies raising larger rounds.

Wisconsin’s 2018 figures rebounded in median and average round sizes after a bit of a slump in 2017. Average round size is at an all-time high of $2.3 million while the median round size is back up over $600,000. Forty-six Wisconsin companies each raised at least $1 million from investors, up from 35 companies in 2017. For 26.9% of early stage companies that secured funding, 2018 was the first year doing so while 73.1% of startups received continued support.

Other trends of note in 2018:

Equity funding (66.1%) continues to be the most popular, followed by debt funding (16.5%) and a combination of the two (7.4%).

Fewer women-led or women-owned business raised funding in 2018. Only 14% of companies that raised funding in 2018 were woman-owned or -led, down from 16.5% in 2017.

The two major industries continued to be Life Sciences and Information Technology, which combined for nearly 70% of all deals. However, Wisconsin’s tech-sector diversity also showed. Charted deals ranged from advanced manufacturing to digital health, from biotechnology to consumer products, and from software to medical devices.

Investors from outside Wisconsin’s borders played a much more significant role in funding state companies in 2018. Investors from Chicago, Boston, New York and California showed up in about 49% percent of deals in which the investors are known.

“We saw a resurgence in the use of Wisconsin Early Stage Seed tax credits after the drop in 2017,” said Bram Daelemans, director of the Tech Council Investor Networks. “Early Stage Seed tax credits are reserved for certified investment funds under the Wisconsin Economic Development Corporation and are eligible for sale or transfer.”

“On balance, 2018 put us right back on track and our ecosystem continues to mature,” said Tom Still, president of the independent, non-profit Tech Council. “We are seeing continued growth in investors and deal sizes. New funds continue to come on line, and more capital is available for our growing and maturing startups. However, much more work must be done for Wisconsin to meet its full potential.”

The 11th annual publication also features a profile on John Neis, the 2018 inductee to the Wisconsin Investor Hall of Fame; policy highlights and updates; a primer on early stage investing in Wisconsin; and a resource guide.

The Tech Council Investor Networks are among major Tech Council programs and projects. They include the Tech Council Innovation Network, the Governor’s Business Plan Contest, the Wisconsin Entrepreneurs’ Conference, the Wisconsin Tech Summit, the Wisconsin Early Stage Symposium and the Wisconsin YES! youth business plan contest. To learn more or to join TCIN, visit: wisconsintechnologycouncil.com/investors/membership/

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